By Steve Goldstein
U.K. stocks advanced in midday action Wednesday, albeit in thin
trading conditions, as traders bet that the recovery in the economy
can continue without interest rates being raised.
The U.K. FTSE 100 rose 0.2% to 5,292.10.
At 2:15 p.m. Eastern time -- well after the close of trading in
London -- the Federal Reserve is due to announce its interest-rate
decisions. While no change in rates is expected, markets will be on
guard for any move in the language accompanying the decision as
well as looking to see if the central bank reins in any of its
liquidity provisions.
But economic reports have been on the encouraging side, as
euro-zone gauges of manufacturing and services sentiment rose to
multi-month highs and as jobless claims fell in the U.K. by 6,300
in November, the first drop since February 2008.
David Miles, a member of the Bank of England's Monetary Policy
Committee, said in a speech that interest rates it sets may be kept
lower as banks hold onto more capital.
Banks led the way, with Barclays (BCS) up 2% and HSBC Holdings
(HBC) up 0.8%. In addition to the low interest rate environment, a
published report suggested that the Bank for International
Settlements will phase in stricter capital requirements over a ten
to twenty year horizon.
A note from Nomura helped drive U.K. media stocks. The broker
said the late-cycle end of the media sector has lagged cyclicals
since the market turn in mid-March and now offers better value, as
it prefers professional publishers, agency and satellite/cable
sub-sectors and recommends avoiding direct and most of the
free-to-air TV companies.
Reed Elsevier , its top pick, rose 1.7%.
BSkyB fell 0.4% after Nomura downgraded the satellite
broadcaster to neutral from buy. BSkyB is 39% held by News Corp.,
which also owns MarketWatch, the publisher of this report.
Diageo (DEO) fell 2.1% to 1,043 pence after it was cut to hold
from buy at Deutsche Bank, saying the stock has reached its 1,050
pence price target as the broker says the broader spirits industry
is challenged by modest volume growth, trading down, some
destocking and a collective cut to advertising and promotional
spending.
Unilever (UL), which Deutsche Bank prefers, also named
Bristol-Myers Squibb's Jean-Marc Huet as its next chief financial
officer. James Lawrence had resigned the post last week. Unilever
shares rose 0.8%.
Outside the FTSE 100, Barratt Developments , Redrow and Taylor
Wimpey each rose between 3% and 8% as Citigroup upgraded all three
to buy from hold, noting that house prices, mortgage applications,
housing transactions and consumer confidence all have improved and
the sector could even withstand a modest fall in house prices
without having to cut asset values.
Pubs operator Punch Taverns fell 3.3%. Managed pub sales fell
1.6% in the last 16 weeks ending Dec. 12, while those at leased
pubs tumbled around 11%.